U.S. Stock Futures Climb After S&P 500’s Biggest Loss Since 2008
U.S. stock futures advanced as investors awaited the outcome of a Federal Reserve meeting after the Standard & Poor’s 500 Index posted its biggest loss since 2008.
Contracts on the S&P 500 expiring in September added 1.8 percent to 1,131 at 7:20 a.m. in New York after earlier rising as much as 3.3 percent and falling as much as 3.2 percent. Dow Jones Industrial Average futures gained 163 points to 10,889.
U.S. stocks tumbled yesterday amid concern that S&P’s downgrade of the nation’s credit rating will worsen the country’s economic slowdown. Every stock in the S&P 500 retreated for the first time since at least 1996 as the index’s 10 main groups all tumbled more than 5.3 percent.
“Right now it’s a question of confidence,” said Jonathan Golub, the chief U.S. market strategist at UBS AG, in a Bloomberg Radio interview in New York. “There is no liquidity shock here, there’s no economic news. This is a confidence game and once we get beyond this and look back at the economics, the market is going to move higher.”
Fed policy makers meet today and plan to issue a statement at about 2:15 p.m. New York time. By a 52 percent to 48 percent margin, respondents in a Bloomberg News survey said the central bank would ease policy this year through monetary tools or statement language. If the Federal Open Market Committee acts, 59 percent said it would communicate that the federal funds rate, balance sheet or both will remain especially stimulative for a longer period or more specific amount of time.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, advanced yesterday to its highest level since March 2009.
Economic data today showed China’s inflation accelerated to the fastest pace in three years in July, limiting the scope for monetary easing as risks to the global economy mount.
S&P lowered the U.S.’s long-term rating one level to AA+ after markets closed on Aug. 5, while keeping the outlook at “negative” as the company becomes less confident that Congress will end Bush-era tax cuts or tackle entitlements. S&P also said the U.S. rating may be reduced to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt.
The S&P 500 is valued at 11.3 times estimated income, the lowest since March 2009, according to data compiled by Bloomberg. The price-earnings ratio reached a low of 9.52 in 2008. The S&P 500 has dropped 18 percent since April 29. The Russell 2000 Index (RTY) of small companies slumped 8.9 percent yesterday, entering a so-called bear market, down 25 percent from its April 29 high.
Alcoa advanced 2.8 percent to $11.65 in New York, while Home Depot increased 2.2 percent to $29.58. AmEx, the biggest credit-card issuer by purchases, slipped 2.3 percent to $42.04 in Germany.
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